The cryptocurrency market is preparing to face an impact as the Federal Reserve Governor warns about the risk of high inflation

The cryptocurrency market continues to face pressure amid rising concerns over inflation in the U.S. and escalating geopolitical tensions. The prolonged US–Iran conflict has driven oil prices sharply higher, adding further strain on the global economy.

In response, traders are adjusting their expectations for the U.S. Federal Reserve’s (Fed) monetary policy. The possibility of short-term interest rate cuts is gradually being dismissed, becoming a negative factor for digital assets.

Cryptocurrency Market Reacts to Fed Inflation Warnings

Fed Governor Christopher Waller stated that his view on easing policy has changed significantly in recent times. Initially, he supported rate cuts after weak February employment data. However, rising inflation risks and geopolitical instability have led him to adopt a more cautious stance.

Waller emphasized that prolonged disruptions in the Strait of Hormuz are the main reason for rising oil prices. He believes the conflict is likely to last longer than expected, making inflation pressures more severe.

He supported the Fed’s decision to hold rates steady last week and assessed that current policies are already tightening. While not supporting rate hikes, he left open the possibility of rate cuts by the end of 2026 if inflation cools down.

Following these comments, the total cryptocurrency market capitalization reached approximately $2.4 trillion, up slightly by 0.18% despite ongoing macroeconomic uncertainties.

Cryptocurrency Market Reaction to Fed Governor’s Outlook | Source: CoinMarketCap Meanwhile, the CMC20 index decreased by 0.06% to 144.01 points, reflecting divergence among major assets. The Fear & Greed index remains at 30, indicating a cautious market sentiment still prevailing.

Powell Affirms Data-Dependent Stance Amid Persistent Inflation

Fed Chair Jerome Powell continued to reinforce a cautious message at the latest FOMC press conference. He noted that inflation in the U.S. remains above target, with the overall PCE index at 2.8% and core inflation at 3.0% — significantly higher than the Fed’s 2% goal.

Powell emphasized that the Fed does not pursue a fixed policy path. Instead, all decisions will depend on economic data and market conditions. He also pointed out that the impact of geopolitical factors on inflation is still too early to fully assess.

Additionally, he warned that rising energy prices due to Middle East tensions could keep inflation elevated in the short term. Therefore, rate cuts will only be considered if there is clear progress in controlling inflation, which could weaken expectations for easing this year.

Data from Polymarket shows that market expectations have shifted rapidly: the probability of no rate cuts increased from around 24% to 35% in just one day.

Oil Prices and Policy Outlook Continue to Pressure Markets

Meanwhile, Bank of America warned that a rate hike scenario remains possible under certain conditions. The bank highlighted three key factors: a stable labor market, continued leadership from Powell, and sustained increases in oil prices. Notably, if oil prices stay above $80, the likelihood of a rate hike rises significantly.

The Iran crisis, now in its fourth week, continues to push energy prices higher, further intensifying inflation pressures and risks to the U.S. economy. In this context, the cryptocurrency market increasingly depends on shifts in monetary policy expectations.

Although Powell emphasized that rate hikes are not the baseline scenario, he reaffirmed that all decisions will be data-driven. He also indicated he might remain in position until Kevin Warsh is appointed. According to Bank of America, any delays in this process could influence future policy directions.